Understanding Auto Repair Loans Can Help You Stay on the Road

Lacking the money to pay for necessary auto repairs? Here's how auto repair loans can help you get back on the road sooner.


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Are you struggling to pay for unexpected car repairs? Not having enough cash on hand could affect your ability to fix the vehicle, which could lead to a number of related challenges both personally and professionally.

Fortunately, auto repair loans can help get you back on the road by paying for costly repairs over time. Here's a look at what qualifies for an auto repair loan, the typical requirements, and some alternatives you may want to consider.

What Is an Auto Repair Loan?

While car insurance usually covers the cost of collision-related damage, you're often on the hook for repairs from normal wear and tear. This is where an auto repair loan can come in handy. Auto repair loans are a type of loan— such as a personal loan, title loan, payday loan, or payday alternative loan (PAL)—that you use to pay for your vehicle's repair. These loans can be secured or unsecured, and each comes with its own loan terms: including various payback times, interest rates, and fees.

There are a number of expenses that qualify for an auto repair loan, including:
  • Brake replacement parts and labor
  • Tire replacement
  • Parts and labor to pass an emissions inspection
  • Powertrain system repairs
  • Damage from a car crash not covered by your insurance policy
  • Issues due to neglecting routine maintenance (such as oil changes and transmission fluid flushes)

If you already have a list of repairs that your car needs, you'll want to ensure with the lender that they meet the requirements for this type of loan.

Auto Repair Loan Requirements

The requirements for an auto repair loan typically depend on the type of loan (personal, title, or payday) that you're using. For example, personal loans may require you to secure the loan with collateral (or they can be unsecured), but a title loan will always require you to secure the loan with your car title.

Whether or not you are approved for a loan is ultimately up to the lender, and they'll base their decision—plus the terms they extend to you—on a combination of:

  • Your debt-to-income ratio
  • Your credit history
  • Your income information

In the case that you don't want an auto repair loan (or were previously denied for one), there are a number of other options you can explore.

Alternative Options to Auto Repair Loans

Before you decide how to pay for auto repairs, you'll definitely want to consider all of your options—including alternatives to auto repair loans. The first thing you can do is check your auto warranty and any warranty extensions to make sure the repair cost isn't already covered.

Next, ask the repair shop if they have a payment plan through a lending institution and what the terms are. If you have a willing family member or friend you can go to for help, then consider that as a borrowing option as well.

A final option to consider is your available credit on an existing credit card or applying for a new credit card to cover the auto repairs. Before choosing this option, you'll want to understand the full cost of doing this, including your monthly payment amount and the interest you'll be paying, since credit cards typically have fairly high rates when carrying a balance.

Bottom Line

As you decide how to pay for needed repairs and whether an auto repair loan is right for you, it's still a good idea to start planning for your next repair.

According to AAA, you should expect to pay between 7.70 cents and 10.43 cents per driven mile in maintenance and repair costs each year. Estimate how much you drive in a year, then calculate how much you should set aside in an emergency fund to be able to pay for future car repairs. Be sure to include your insurance deductible costs in this amount.

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Amanda Grossman
I prefer used cars, having never actually purchased a brand-new car in 38 years. What I love to teach and talk about are the finances behind your car-buying decision — like knowing what kind of car fits into your budget, maintaining a car so that it can perform well, longer, and cutting down car ownership costs.